|I think we are wasting our time here...|
On each side is both a house divided and parties ready to make demands they well know cannot be accepted by the other. On the Palestinian side there is no one voice that speaks for Palestine, now effectively divided between Gaza and the West Bank. At the same time Israeli intransigence is a reflection of the dynamics within its ruling coalition.
International attention, almost all of it unflattering towards Israel, focussed on the clumsy way in which the Turkish supported fleet challenging the blockade of Gaza was intercepted.
On the ground though almost nothing changes. Israel remains threatened by rocket attacks and the likelihood of other terrorist activities. The occupied territories remain poor, unstable and dangerous. In this report we discuss several different scenarios, both internal to Israel as well as external to it, that describe how the present steady state position might be destabilised.
From a defence equipment market perspective, Israel is both a large consumer and also a significant producer/exporter of military hardware.
Economically, the position is mixed but mostly positive. The economy has returned to growth, recording GDP growth of 3.2% for the 12 months to the end of Q1, as compared to just 1.7% for calendar 2009. We expect the external sector to bounce back during the next 12 months, but that exports will grow more slowly than imports. The constraint here is that Israel exports principally to the slower growing developed economies. In 2009 the US accounted for 35% of all Israeli exports and the EU for 29%. The key for accelerated export growth will lie in Israel’s ability to develop new markets among the faster growing economies, especially in Asia.
Above all this though hangs the risk of a war that would disrupt both production and investment.